Uganda Government raises Shs2.2 trillion from Treasury Bills in February

Uganda’s Ministry of Finance has released its “Performance of the Economy Report” for February 2025, revealing significant government borrowing through treasury bills (T-bills) and treasury bonds (T-bonds), alongside fluctuations in interest rates.

The report details that the government successfully raised a total of Shs. 2.266.6 trillion from the sale of these securities. Of this substantial amount, Shs. 742.8 billion was generated from T-bills, while a significantly larger Shs. 1.523.7 trillion came from T-bonds, highlighting a strong appetite for longer-term government debt.

A breakdown of the funds’ utilization shows that Shs. 646.6 billion was allocated to refinance maturing securities, effectively managing existing debt obligations. The remaining Shs. 1,619.9 billion was directed towards financing various items within the national budget, supporting government expenditure and development projects.

Treasury Bill Market Dynamics

The T-bill market, which deals with short-term government debt, experienced a mixed performance in February. Yields, representing the interest rates paid on these securities, saw a notable decline for the 182-day and 364-day tenors. Specifically, the yield on the 182-day T-bill fell to 13.9 percent from 14.4 percent in January, while the 364-day yield dropped to 15.0 percent from 15.3 percent.

Conversely, the yield on the 91-day T-bill saw a slight increase, rising to 10.7 percent in February from 10.4 percent in the preceding month. The overall trend of declining yields is attributed, in part, to the lagged effects of the Central Bank’s monetary policy easing, which aims to stimulate economic activity by lowering interest rates. Additionally, strong demand for government securities from the private sector contributed to the downward pressure on yields.

Treasury Bond Market Trends

In the longer-term debt market, the government re-opened 2-year, 5-year, and 15-year tenor bonds, offering investors opportunities for extended investment horizons. Similar to T-bills, yields on these bonds also experienced a slight decline compared to previous issuances.

Specifically, the yield on the 2-year bond fell to 15.8 percent from 16.0 percent in January, the 5-year bond yield decreased to 16.3 percent from 16.8 percent, and the 15-year bond yield dropped to 17.0 percent from 17.5 percent.

Understanding Treasury Bills and Bonds

• Treasury Bills (T-bills): These are short-term debt instruments issued by the government, typically with maturities of 91, 182, or 364 days. They are considered low-risk investments and are used by the government to raise short-term funds.
• Treasury Bonds (T-bonds): These are longer-term debt instruments, with maturities ranging from 2 to 15 years or even longer. They offer investors a steady stream of income through periodic interest payments (coupons) and are also considered relatively safe investments.
• Yields: In the context of government securities, yields represent the effective rate of return an investor receives. They are influenced by factors such as the central bank’s monetary policy, market demand, and overall economic conditions.

The Ministry of Finance’s report highlights the government’s ongoing efforts to manage its debt and finance its budget, while navigating the complex interplay of interest rates and market demand.